• Introduction to the Stock Market Game
What is Stock? Why do people buy it?
• -Stocks: Part of a company people buy because they want to earn money.
• Money is earned or lost depending how well the company does.
• Stocks are a quick way to earn money (if you pick the “right” ones)
Why do businesses offer stock?
àThey want to expand/grow
Example: Facebook
• How to stocks come to market?
What is a bond?
à Bonds are certificates where you give the government or a company money and in return they PROMISE that within a certain amount of time they will give you all of your money back (no matter what) plus some interest.
• They are seen as “safer” than stocks as you get your money back +interest
• It may take a long time to get your money back
What are mutual funds?
àMutual funds are “baskets” of stocks. A mutual fund contains a little bit of different stocks.
àYou invest in many stocks at once but in small amounts
What are portfolios?
• A portfolio is a report of all your stocks, bonds, mutual funds.
• What is the relationship between risk and reward?
• àMore Risk=Higher Reward but also Higher Losses
• Idea is to have a balanced portfolio (a little bit of everything)
What is a stock market?
• An organization that allows companies to sell stock.
Ex: Nasdaq or NYSE
àEach country has their own stock market.
How is a trade made?
• ->You go through a brokerage Company
• Ex: Wells Fargo, Charles Swab, Edward Jones
Characteristics of a perfect product
Widgets, Inc. makes a product that…
– everyone needs (or thinks they need)
– no one has
– is used daily
– cannot be duplicated
– will be needed in the future
– costs little to produce and ship
– Examples?
What’s good news and what’s bad news?
BAD NEWS
Decreased Products Sales= Decreased Profits = Decreased Interest in Stock = STOCK PRICES GO DOWN
Good News
What determines the price of stock?
• -Supply and Demand, What people “think” about the stock.
How to read the stock page?
The Stock Market Game Basics
– You will be on a team
– Each team begins with a hypothetical $100,000 and may buy or sell stocks, bonds, and mutual funds listed on NYSE or NASDAQ that have traded in the last 7 days.
– Teams may “buy on margin” (take out a loan) $100,000 for a total of $200,000 for investing. A 7% interest rate is charged on the loan (cash * interest (decimal) / 365).
– $100,000 X .07 / 365 = $19.18/day
If you buy on margin you better make sure it is a “sure thing.” or you will be “naked” and unable to payback the loan.
• Teams should keep their passwords very safe – if a password is stolen and fraudulent transactions submitted, there is no undo.
• Remember IDs and passwords are sensitive.
• Do Not change passwords
• Must buy a minimum of 100 shares.
• A 1% broker’s fee is charged for each transaction.
• Stocks and mutual funds valued at less than $5 per share may not be purchased.
• Weekly 7% interest charged on negative cash balance, 5% credited on positive cash balance.
• Game week runs Monday-Friday. Teams may trade on any day the participating stock markets are open. Orders may be entered 24-7.
• The game takes 24 hours to update.
• Team with the highest portfolio equity (value) at the end of the game wins!
Teams compete regionally and statewide:
• Local Awards reception at VCU in May
• Top 3 portfolios in VA are invited to Annual State Awards Luncheon in Richmond in May
Game Tips:
• Play for the short-term and take a lot of risks -- opposite strategy when investing real money – buy NASDAQ growth stocks vs. NYSE blue chips
• Spend time doing research -- buy stocks that are likely to go up and down a lot (i.e., newer companies)
• Spend all your $$$$$ -- leaving cash balances cannot match the return available in the market
• Invest in what you know!